In a challenging economic climate, a ‘perfect storm’ of global events and generational trends has made it even more important for employees to make the most of their money.
The credit culture of spending beyond our means has clearly – and disastrously – spun out of control, while fewer of us are saving for our futures. And, with ?nal-salary pensions increasingly a thing of the past, we are not only living longer and healthier lives – but also aspiring to do more with them than previous generations. All of which has created a yawning gap between expectations and reality.
Employees may dream of a comfortable retirement ?lled with foreign travel, but will they have the funds to make it happen? There is a critical lack of awareness when it comes to ?nancial circumstances: many simply don’t understand the basics or have the right tools to plan their ?nances.
Employers can provide the necessary tools and help employees improve the way they manage their salary and bene?ts – in both the short and the long term, whatever their stage of life. And it all comes down to putting money in the context that matters: the personal circumstances of each employee
According to research carried out by HR magazine and Vebnet, nearly 77% of employers believe they have an opportunity to improve their employees’ ?nancial awareness. Yet, while so many agree they could help their workforce better manage their bene?ts and general ?nances, well over half offer no ?nancial education – and almost 39% have no plans at all to do so.
Although some cultures have proved better at saving than others, a lack of ?nancial foresight among employees is largely a global issue. So, how exactly can the world’s employers help in terms of information and education?
The answer begins in the workplace reward and bene?ts portal, with its huge potential to offer a variety of added-value tools and educational resources.
By positioning the reward portal as the place to go for all personal ?nance matters – a holistic employee reward portal – employers can strengthen the link for employees between bene?ts and personal goals. In other words, they can demonstrate more clearly than ever how individual bene?ts could ?t into the broader context of employees’ lives and different stages of their ?nancial lifecycle.
With a ‘jargon buster’ to explain any unfamiliar terms or complex concepts, the employee portal should ideally provide a basic introduction to ?nance planning. It should also cover in some detail the full range of ?nance options that will help employees through their ?nancial lifecycle, including borrowing and mortgages, saving and investment opportunities, planning for retirement and pensions, critical illness protection and inheritance planning.
Financial education strategies are of little use to employers if they fail to engage their target audience, the workforce.
In fact, the survey by HR magazine and Vebnet shows employee engagement remains one of the main issues for over half of today’s employers. And with some difficult, potentially dry subject matter to tackle, ?nancial education tools need to work as hard as any bene?ts scheme to catch employees’ attention.
There is, however, a straightforward recipe for success: make every piece of information as relevant as possible to the real-life issues your employees will face. Or, put another way, avoid abstract explanations about ?nancial solutions and bene?ts. Whether you’re describing life insurance or a pension plan, employees need to understand exactly what’s in it for them.
As much as possible, educational tools should be interactive, driven by life events and linked to personal goals. Whether they are paying off university debt, planning to get married or to buy a house, employees might not immediately make the connection between certain ?nancial options or bene?ts and their own situation. An employee reward portal can point them in the right direction, encourage them to consider all the relevant factors – and more.
Modelling tools, for example, can give a more concrete and meaningful idea of the results of regular saving: exactly how much an employee could earn by putting away so much a month for a certain number of years.
The same approach can be applied to pension schemes. When retirement age is still somewhat in the distance, the bene?ts of a scheme can seem a little remote. Putting that pension in the context of an employee’s goals, however, will bring the long-term advantages into sharper focus. A regular monthly payment could make a lot more sense when it means, for instance, being able to retire at 60 on an income of £20,000 a year.
As well as interactive calculators, tax data and other written information, the employee reward portal can offer access to face-to-face seminars about ?nancial issues and even individual ?nancial advice. Crucially, though, it should not in itself be a source of speci?c ?nancial advice. It is in the employer’s remit to provide education – but not to make recommendations.
Above all, it should be the portal’s goal – and that of all related communication – to help employees understand and make the best possible use of their bene?ts. This, in turn, will help the employer increase engagement with its bene?ts offer – making it both more relevant and more efficient.
Most excitingly of all there is the clear potential for employers to expand their bene?ts offering to include savings and investment products, from ISAs and share schemes to child trust funds. And all via the employee reward portal.
The objective is to encourage employees to gain greater control over their ?nances – and, most importantly, to use the products and bene?ts that best suit their stage of life and their speci?c goals.
What’s more, by taking a ?uid, ever-evolving approach to their ?nancial circumstances, and moving their money between different vehicles at the most tax-efficient times, employees are able to take fuller advantage of tax breaks. Those that pay tax at the lower rate could be better off saving in an ISA, which deducts no tax from interest earnings. But should their career take them into the higher-rate tax band, pension contributions will be a more tax-efficient alternative, entitling them to relief at 40%.
Key to the success of the new, added-value employee reward portal is strong, well structured communication. Remember: this is an opportunity for employers to drive take-up of their bene?ts offer – and to set out their stall as an employer of choice.
All written information should be in plain English and as easy to understand as possible, with content that is clearly targeted towards the relevant segment of the workforce. The content can take many forms, from simple written information to video case studies that tell a compelling story and bring the range of bene?ts to life. What matters most is that employees identify with the issues being raised, issues that are likely to affect them either soon or in the future.
As a whole, the ideal employee wealth portal undoubtedly involves a complex array of information, ?nancial services and technological tools. In all of this, think of the bene?ts service provider as the ‘glue’ that pulls and keeps it all together – taking care of everything from administration and technology to communication materials and the look-and-feel of the portal.
For an employer, the bene?ts are clear. Playing a more active role in its employees’ ?nancial security and helping them make informed decisions, while meeting their changing needs over time with relevant products, will really set an organisation apart from its competitors.
And, as a result, it will be in a stronger position to recruit and retain the very best talent.
Richard Morgan is head of consultancy services at Vebnet